Reduce Supply Chain Risk with a Vertically Integrated Supplier

Learn more about what a vertically integrated supplier is and how Coherent has taken actions to domestically source critical components, ultimately alleviating the supply chain uncertainty to better support our customers.

July 20, 2021 by Coherent

Vertical Integration Diagram

Companies often say they are ‘vertically integrated’. But what does that mean to a customer? In short, it means proactively taking steps to assure continued delivery of the critical components needed to manufacture your final product without affecting cost or schedule.

Why vertically integrate? Fluctuations in demand affect both price and delivery. We’ve seen this first-hand as the COVID-19 global pandemic caused a demand for computers as people worked and learned remotely, in turn causing a global semiconductor shortage.

Vertical integration is a strategic decision tied to risk mitigation. It identifies specific components used in manufacturing that, if not available, would significantly impact or even halt production. A vertically integrated supplier is dedicated to becoming a reliable business partner by assuming the risk related to the essential components they provide to your company.

One such example of successful strategic vertical integration is Coherent, Inc., in Santa Clara, CA.  Actions taken by the company over the past decade have enabled Coherent to vertically integrate critical components of its laser fiber amplifier supply chain within the United States. “A key differentiator for us in this market is a US-based supply chain for all critical components, many of which are vertically integrated within Coherent, which we believe is unique in the industry,” the company noted in its 2020 Annual Report.

Epitaxy, semiconductors, diodes, and Volume Bragg Gratings from Coherent are produced across factories in California, while other US locations are dedicated to the manufacture of lasers, crystals, optical fibers, and optical isolators. Beyond the supply chain, a commitment to expand manufacturing capacity now allows Coherent to be responsive to complex customer requests, including designing and delivering sub-systems or to act as a contract manufacturing partner.

Vertical integration allows Coherent customers to focus on system integration rather than component procurement. With many of our critical laser components located within the US, the company is well-positioned to assist our customers with the facilitation of manufacturing critical sub-systems in a timely and cost-effective manner.  Contact us to learn how you can benefit from this approach.

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